Ita/111/2013 Of M/S Charan Dass Ashok Kumar v. Commissioner Of Income Tax-Iii

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.111 of 2013 (O&M)Date of decision: 14.03.2014 M/s Charan Dass Ashok Kumar, Moga (AADFC3410D) .....- Appe Vs, Commissioner of Income Tax III, Ludhiana| ...KReSponden CORAM: HON’ BLE MR. JUSTICEK AJAY KUMAR MITTHON’BLE MS. JUSTICEK ANITA CHAUDHRY! Present:Mr.Ravish Sood, Advocate for the appellant,Mr. Rajesh Katoch, Advocate for the revenue, Ajay Kumar Mittal,J. inThis appeal has been preferred by the assessee under section260A of the Income Tax Act, 1961 (in short, “‘the Act’) against the ordedated 20.9.2012, Annexure A-6, passed by the Income Tax AppellateTribunal, Amritsar Bench, Amritsar in ITA No.369(ASR)/2011 for theassessment year 2006-07, claiming following substantial questions of law:- 1. Whether the Tribunal while disposing of the appeal 1s righin law in refusing to take cognizance of extract of the cashbook dated 29.12.2005 placed at page 9 of the paper bookfurnished by the appellant firm, specifically when during thecourse of hearing of the appeal the Tribunal after dulyin law in refusing to take cognizance of extract of the cashbook dated 29.12.2005 placed at page 9 of the paper bookfurnished by the appellant firm, specifically when during thecourse of hearing of the appeal the Tribunal after duly taking cognizance of the same had raised queries, madenotings, and even called upon the departmentalrepresentative to place his counter submission as_ regardsthe same, by so doing had therein admitted the same, and noobjection/defect as regards the same was ever brought to thenotice of the appellant firm, either by the registry or by thebench? 2. Whether the findings of the Tribunal that the appellant firhad not furnished any documentary evidence or anyexplanation either before it or before the lower authoritiesbeing perverse cannot be sustained in the eyes of law?had not furnished any documentary evidence or anyexplanation either before it or before the lower authoritiesbeing perverse cannot be sustained in the eyes of law? 3. Whether the Tribunal is right in law in upholding thepenalty imposed in the hands of the appellant firm undersection 271D of the Act for technical/venial breach of theprovisions of section 269SS, specifically when the said loantransaction stood duly recorded in the books of accountwhich were unilaterally produced before the AO during thecourse of the assessment proceedings and neither thegenuineness of the loan nor the source thereof had ever beendoubted by the AO while framing the assessment of theappellant firm?penalty imposed in the hands of the appellant firm undersection 271D of the Act for technical/venial breach of theprovisions of section 269SS, specifically when the said loantransaction stood duly recorded in the books of accountwhich were unilaterally produced before the AO during thecourse of the assessment proceedings and neither thegenuineness of the loan nor the source thereof had ever beendoubted by the AO while framing the assessment of theappellant firm? 4. Whether the Tribunal 1s right in law in upholding the levy openalty imposed under section 271D of the Act in respect ofa cash loan raised by the appellant firm from its agriculturistcustomer, which was prompted by urgent need of funds tomeet out outstanding bank lability, remaining under thebonafide belief that cash transactions with the agriculturistcustomers were permissible in toto, specifically when thesaid loan transaction stood duly recorded by the appellantfirm in its regular books of account which were unilaterallyproduced before the AO during the course of the assessmentproceedings and neither the genuineness of the aforesaidloan translation nor its source had ever been doubted by therevenue/department, specifically when no prejudice wascaused to the revenue/department in the instant action of thepenalty imposed under section 271D of the Act in respect ofa cash loan raised by the appellant firm from its agriculturistcustomer, which was prompted by urgent need of funds tomeet out outstanding bank lability, remaining under thebonafide belief that cash transactions with the agriculturistcustomers were permissible in toto, specifically when thesaid loan transaction stood duly recorded by the appellantfirm in its regular books of account which were unilaterallyproduced before the AO during the course of the assessmentproceedings and neither the genuineness of the aforesaidloan translation nor its source had ever been doubted by therevenue/department, specifically when no prejudice wascaused to the revenue/department in the instant action of the appellant firm in as much as it did not attempt by theimpugned act to avoid any tax liability? 5. Whether the Tribunal 1s right in law in upholding the levy openalty under Section 271D of the Act in the hands of theappellant firm on the basis of premature observations,findings and investigations?”penalty under Section 271D of the Act in the hands of theappellant firm on the basis of premature observations,findings and investigations?” ) -A few facts relevant for the decision of the controversy involved, asnarrated in the appeal, may be noticed. The appellant firm as a>kacchaadarti(Commission agent in food gains) was dealing with agriculturists. Itwas catrying out cash transactions with respect to payments to theagriculturists of the sale proceeds of their agriculture produce which wassold through it as an intermediary. The business of the appellant firm whicwas already facing financial crisis due to lack of liquidity, was burdenedwith a full availed credit facility of45 lacs from Punjab and Sind bank. Iwas further adversely hit when on one part the bank was pressing hard forthe repayment of the outstanding dues and on the other hand, the realbrothers of one of the partners of the appellant firm namely Shri CharanDass who had put joint family property as a security with the bank waspressuring him for getting a clear title of the property from the bank. Theappellant firm decided to clear the outstanding liability towards the bank intoto wherein the same as on 29.12.2005 stood reflected at an amount oftL5,10,726/-. However, on the relevant date, the cash in hand available withthe appellant firm was only L66,128.66 and, therefore, the latter raised aloan from one of its agriculturist customer Shri Jugraj Singh son of ShriGurdev Singh r/o Village Randiala on 29.12.2005 which was duly recordedby the appellant firm in its books of account.The said amount including=10,726/- was deposited by the appellant towards full and final discharge ofSingh Gurbaxthe entire outstanding bank liability and consequently,the aforesaid joint2014.04.24 10:39I attest to the accuracy andintegrity of this documentHigh Court Chandigarh family property lying with the bank was got released. The case of theappellant was taken up for scrutiny proceedings. Penalty proceedings forraising the loan by the appellant firm in contravention of the provisions ofsection 269SS of the Act were initiated by the Addl. CIT, Moga. Theappellant aggrieved by the order filed appeal before the CIT(A) Ludhianawhich was also dismissed vide order dated 23.2.2011, Annexure A-3. Stillnot satisfied, the appellant filed appeal before the Tribunal. Vide order dated20.9.2012, Annexure A-6, the Tribunal dismissed the appeal. Hence theinstant appeal by the assessee. 3)We have heard learned counsel for the parties and perused the record. 4In terms of the order dated 27.1.2014, learned counsel for theappellant has produced the revenue record to show Jugraj Singh son of ShriGurdev Singh r/o Village Randiala from whom the assessee had taken a loanof Rs.5 lacs in cash had sufficient means to pay the same. It was urged thatit was under compelling circumstances that the loan in cash was taken as theassessee was to discharge the bank liability and banking facility was notreadily available in the Village. Reliance was placed on judgments in.M/sSona Paper Board & Limited v. JCI,ITA No.142 of 2009, decided on20.4.2011, ADIT (Inv.) vs. Kum. A.B.Shanthi, (2002) 255 ITR 258(SC),CIT vy, Saint Medical Stor, (2005) 277 ITR 420 (P&H),CIT vs. SunilKumar Goel, (2009) 315 ITR 163 (P&H),|Hindustan Steel Limited v. Stateof Orissa,(1972) 83 ITR 26 (SC) and>CIT vs. Datta Nagari Sah Pat Sanstha Maryadit,(2010) 322 ITR (St) 13 1n support of the submissions. 6]On the other hand, learned counsel for the revenue submittedthat the Assessing Officer, CIT(A) and the Tribunal have concurrently come to the conclusion that there was no reasonable cause under section 273B ofthe Act for accepting loan in cash and thus, there was violation of section269SS of the Act and accordingly penalty under section 271D of the Actwas rightly levied. TdAfter hearing learned counsel for the parties, we do not findany merit in the appeal. |The findings recorded by the Assessing officer vide order dated 28.11.2008, Annexure A.1 read thus:- “Assessment in its case was completed vide order underSection 143(3) of the Income Tax Act, 1961 dated 28.11.2008.At the time of framing the assessment, 1t was observed by theIncome Tax Officer I, Moga that the appellant firm hadaccepted a loan ofa5 lacs in cash on 29.10.2005 from ShriJugraj Singh s/o Shri Gurdev Singh r/o Village Randiala forverification of facts necessary copy of account of the saidperson was called for by the AO which revealed that theassessee accepted cash loan ofvO5 lacs on 29.10.2005.Accordingly the Income Tax Officer I, Moga referred theproceedings under section 271D of the Income Tax Act, 1961for imposition of penalty as the assessee had violated theprovisions of Section 29SS of the Income Tax Act, 1961. TheAO referred these proceedings to the undersigned vide hisoffice letter No. [TO/Moga/7507 dated 13.1.2009. Therefore, show cause notice under section 271D read with section 269SSof the Income Tax Act, 1961 dated 19.11.2009 was issued to thappellant firm which was duly served upon the assessee on27.1.2009 and the proceedings under this Section were fixedfor hearing on 6.2.2009. This show cause notice remaineduncomplied as neither the assessee attended the penaltyproceedings nor any written reply has been received. Again afresh show cause notice No.180 dated 24.4.2009 was issued for29.4.2009, which was duly served upon the assessee on 27.4.2009. This show cause notice also remained uncompliedas none attended nor any written reply has been received in thisoffice. To meet the ends of justice again a show cause noticeNo.484 dated .5.2009 was issued for 14.5.2009 which was dulyserved upon the assessee on 12.5.2009. This show cause noticealso remained uncomplied as neither the assessee attended thepenalty proceedings nor the assessee sent any writtenexplanation 1n this regard. 27.4.2009. This show cause notice also remained uncompliedas none attended nor any written reply has been received in thisoffice. To meet the ends of justice again a show cause noticeNo.484 dated .5.2009 was issued for 14.5.2009 which was dulyserved upon the assessee on 12.5.2009. This show cause noticealso remained uncomplied as neither the assessee attended thepenalty proceedings nor the assessee sent any writtenexplanation 1n this regard. In the absence of any reply by the assessee, it 1s presumed thatassessee has nothing to say in this matter and the appellant firmaccepts its default committed under the provisions of section269SS of the Income Tax Act, 1961. The default of theappellant firm is clearly established as the appellant firm hasaccepted loan ofLC5 lacs in cash from Shri Jugraj Singh s/oShri Gurdev Singh in contravention of the provisions ofSection 269SS and as such the assessee 1s liable to pay, by wayof penalty, a sum equal to the amount of loan sotaken/accepted. Therefore penalty ofa5 lacs 1s imposed on theappellant firm under Section 271D of the Income Tax Act,accordingly.” 9. The CIT(A) vide order dated 23.2.2011, Annexure A.3 affirmed!the penalty order with the following observations:- “5S. | have gone through the contention of the appellant’scounsel and also perused the relevant penalty order as well asrival submissions filed by following the provisions of sectioncounsel and also perused the relevant penalty order as well asrival submissions filed by following the provisions of section 269SS of the I.T.Act, 1961 which is reproduced as under:-“No person shall, after the 30[th]day of June 1984, take oraccept from any other person (hereafter in this sectionreferred to as depositor), any loan or deposit otherwisethan by an account payee cheque or account payee bankdraft if —“No person shall, after the 30[th]day of June 1984, take oraccept from any other person (hereafter in this sectionreferred to as depositor), any loan or deposit otherwisethan by an account payee cheque or account payee bankdraft if — (a) The amount of such loan or deposit or the aggregate amount ofsuch loan and deposit, orsuch loan and deposit, or (b) On the date of taking or accepting such loan or deposit, anyloan or deposit taken or accepted earlier by such person fromthe depositor 1s remaining unpaid (whether repayment hasfallen due or not), the amount or the aggregate amountremaining unpaid, orloan or deposit taken or accepted earlier by such person fromthe depositor 1s remaining unpaid (whether repayment hasfallen due or not), the amount or the aggregate amountremaining unpaid, or (c) The amount or the aggregate amount referred to 1n clause (a)together with the amount or the aggregate amount referred to inclause (b),together with the amount or the aggregate amount referred to inclause (b), Is twenty thousand rupees or more.” In the case in hand, the appellant has accepted a cash loanamounting to_<a5,00,000/- from one person which 1s very clearviolation of provisions of Section 269SS of the Act. Theappellant’s counsel plea that it was due to exigency ofcircumstances 1s also irrelevant as the loan was taken forrepayment of another bank loan and which could very well takenby the cheque. Further, the facts of the case laws cited by thecounsel are different and not applicable to the facts of the case.The AO in this case provided repeated opportunities to theappellant but the appellant did not appear before the AO. keepingin view the above factual position of the case, | am of the viewthat the AO has rightly imposed penalty under section 271D of theAct on the above said ground. Therefore, the penalty levied 1shereby confirmed and appellant’s grounds of appeal aredismissed.’ 10.|On further appeal by the assessee, the Tribunal vide order dated20.9.2012, Annexure A.6, upheld the findings recorded by the CIT(A) asunder:- 10.|On further appeal by the assessee, the Tribunal vide order dated20.9.2012, Annexure A.6, upheld the findings recorded by the CIT(A) asunder:- “8. We have heard the rival contentions and perused the facts ofthe case. The learned counsel for the assessee Shri Ravish Soodhas filed paper book containing 96 pages out of which page |to 8 are the written submissions, which in fact, have not beenread before us. Page 9 of the paper book is the photocopy ofcash book which contains on one side deposit of L5 lacs from Shri Jugraj Singh s/o Shri Gurdev Singh and on the other sidedeposit of cash with PSB amounting to“a5,10,726/- in cash on29.10.2005. From paper book pages 10 to 96 there are copiesof decisions of various courts of law. Infact, there is only onepage of the cash book showing deposit of Mr. Jugraj Singh andthe payment ofa5,10,726/- to the Bank on 29.10.2005. Thesald page 1s unsigned by the assessee or by the learned counselfor the assessee and has no validity in the present case. There 1sno other explanation placed on record by the learned counselfor the assessee given before any of the authorities below. Thelearned counsel had advanced the arguments before this BenchaS mentioned hereinabove without any documentary evidenceor without furnishing any explanation before any of theauthorities below or even before us. Now the question ariseswhether arguments advanced by the learned counsel appearingfor the assessee before this Bench can take shape of theexplanation before both the authorities below or even before usand that too without any documentary evidence or cogentexplanation. To our view such arguments cannot be treated asexplanation before any of the authorities below or even beforeus. The assessee has relied upon the decisions of various courtsof law.As regards the decision of Hon’ble Punjab and HaryanaHigh Court 1n the case ofCIT vy, Sunil Goe(supra),the facts inthat case are quite distinguishable with the facts of the presentcase. In the present case, the assessee had not transactedbetween the family has not been established as against in thecase of CIT v. Sunil Goel (supra). The assessee has to establishthe business exigency in the present case as in the case of CITv. Sunil Goel (supra). In the present case, no urgency ofbusiness exigency has been established by raising a loan otf=7lacs and that too on 29.10.2005. The assessee has not producedbefore any of the authorities below or even before us that therewas a dead line that the amount was required to be depositedwith the bank only on 29.10.2005 and thereafter the assesseewas to be heavily penalized or some dire consequences were 1n the offing by the bank. In the absence of any business exigency,the reasonable cause cannot be established. The assessee hasnot brought on record before any of the authorities below oreven before us that the persons from whom loan has been takenis an agriculturist and does not maintain any bank account,Nothing has been brought on record that the assessee beingKacha Arhtia 1s also an agriculturist and does not maintain anybank account. The assessee could not establish that the saidtransaction was without any intention to avoid tax, sinceignorance of law cannot be an excuse in the present facts andcircumstances of the case. Therefore, the decision in the case ofCIT v. Saini Medical Store (supra) is also distinguishable in thepresent facts and circumstances of the case. The other casesrelied upon by the learned counsel for the assessee are alsodistinguishable in the present facts and circumstances andcannot help the assessee. In the facts and circumstances, theassessee 1S not able to prove that there was a reasonable causein taking or accepting any loan or deposit otherwise by anaccount payee cheque or account payee bank draft. Therefore,we find no infirmity in the action of the learned CIT(A), whohas rightly confirmed the penalty levied by the AO.Accordingly, all the grounds of the assessee are dismissed.”ll.From the above, it would be discernible that the assessee-firmhad accepted loan ofa5 lacs in cash on 29.12.2005 from Shri Jugraj Singh.The assessee-firm was issued repeated show cause notices dated 19.1.2009,24.4.2009 and 14.5.2009 but the assessee did not avail the opportunity togive any explanation justifying the transaction of accepting loan of=a5 lacsfrom Jugraj Singh in cash in violation of provisions of Section 269SS of theAct. Accordingly, the Assessing Officer held that the assessee-firm hadnothing to say in the matter and imposed penalty under Section 271D of theAct for contravening Section 269SS of the Act. On appeal, it was noticed by according to it the loan was taken for discharging another bank loan and insuch circumstances it could be by cheque. Before the Tribunal, paper bookwas filed which contained the written submissions and the judgments reliedupon by the assessee. In addition, at page 9 of the paper book was photocopy of cash book showing deposit ofL5 lacs from Jugraj Singh and on theother side there was entry of LT5,10,726/- in cash deposited with PSB. It wasnoticed that even this was unsigned and 1n any case this by itself would notjustify taking of loan in cash from Jugraj Singh. It was also not shown thatthe assessee as well as Jugraj Singh were not maintaining any bankaccount. Under the circumstances, it was concluded that the assessee hadfailed to establish that there existed reasonable cause in taking or acceptingany loan or deposit otherwise than by an account payee cheque or accountpayee bank draft. The effort of the learned counsel for the appellant was toreappraise the material so as to record a finding that there was reasonablecause for the assessee to have accepted loan of v5 lacs from Shri JugraySingh in cash. The view which has been taken by the Assessing Officer, CIT(A) and the Tribunal concurrently is a plausible view and it cannot be saidthat there was any error 1n the approach adopted by them. Accordingly, wedo not find any justification for interference. The scope of Section 260Arelates to matters where substantial question of law arises for consideration.12.Adverting to the judgments relied upon by the learned counselfor the appellant, it may be noticed that therein the Tribunal had recordedfinding of reasonable cause under Section 273B of the Act and on that basis,it was held that no substantial question of law arose. The said cases weredecided on individual facts involved therein and no advantage can bederived by the learned counsel for the appellant from the same. 13. In view of the above, no substantial question of law arises and the appeal stands dismissed. (Ajay Kumar Mittal)vudge March 14, 2014;0$7 (Anita Chaudhry)vudge I